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Numis: our New Year investment trust tips

Winners and losers

Numis Securities’ investment trusts analysts have reviewed the performance of their recommendations in 2016.

Looking back at a year dominated by the Brexit vote, Donald Trump’s election victory and a swing from defensive into economically-sensitive cyclical stocks, the team, led by Charles Cade, described their tips as a ‘mixed bag’.

Their winners included Monks (MNKS), Temple Bar (TMPL), Fidelity Special Values (FSV), North American Income (NAIT), JPMorgan US Smaller Companies (JUSC), alongside BlackRock World Mining (BRWM), which doubled after a long period of weak performance.

The team feels positive about the changes that chief executive Andrew Bell has put in place since he was appointed in 2010, including the decision to stop allocating to index trackers. They also welcomed the board’s decision to repurchase the 15.8% stake held by Aviva at a 6.5% discount to ‘net asset value’, which equates to the trust’s total underlying assets.

‘We believe that Witan is an attractive way to gain diversified global equity exposure via a range of leading managers through a cost-effective vehicle with ongoing charges of 0.72% or 0.99% including performance fees,’ Numis said.

The team removed Foreign & Colonial, following a strong year which saw the trust’s share price rise by 33.8% and net asset value increase by 34.2%.

Next: BlackRock Income Strategies a ‘buy’

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BlackRock Income Strategies a ‘buy’

BlackRock Income Strategies (BIST), formerly British Assets, had a difficult 2016, marked by a 16% share price fall and 5% NAV decline.

‘The fund faced a number of headwinds, including the need to deliver a high dividend payout at a time of falling long term rates, and the drag of expensive debt. In addition, a cut in the fund’s equity exposure in early 2016 was poorly timed with hindsight,’ Numis explained.

In late 2016, the board decided to sack BlackRock as manager, in favour of Aberdeen Asset Management. Mike Brooks and Tony Foster (pictured) of Aberdeen’s diversified multi-asset team will manage the trust, which will be renamed Aberdeen Diversified Income and Growth (ADIGT).

The trust is also set to merge with the Aberdeen UK Tracker Trust (AUKT). The board hopes this will increase the size of the trust, lower its cost ratio and improve the liquidity, or tradability, of its shares.

Numis welcomes these changes, alongside the planned tender offer for up to 20% of its NAV ahead of the merger. ‘The proposals provide a sensible solution for the problems of both funds. A key trigger has been the fact that Aviva is the largest shareholder in both companies: 13.3% in BIST and 24.7% in AUKT,’ Numis said.

Aviva’s stakes pose potential problems because the insurer is looking to sell out of the legacy stakes it inherited from AXA, after buying its Friends Life business.

On a discount to NAV of 12%, Numis believes that BIST offers value.

Next:‘sell’ Lindsell Train

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‘Sell’ Lindsell Train

Under manager Nick Train, Lindsell Train (LTI) has generated stellar returns over the years. Over three years, its share price is up 158.2% while its NAV returned 83.5%.

However, an investor shift out of ‘bond proxies’, defensive stocks that offer bond-like stable dividends, into cyclical stocks has hit the trust’s performance over the past three months. The trust’s popularity means that it has consistently traded at a high premium, which today stands at 56.3%. Numis describes this figure as ‘excessive’.

‘Shareholders face the potential for substantial losses if the premium starts to contract. We would recommend switching into one of the other defensive global investment companies or into Finsbury Growth (FGT), also managed by Nick Train, which has minimal discount volatility due to an active share buyback and issuance policy,’ analysts at Numis explained.

With this in mind, Numis has moved the trust to a sell rating.

Next: Capital Gearing protects capital

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Capital Gearing protects capital

Like their rival Winterflood Securities, Numis highlights Capital Gearing Trust (CGT) as a top pick for investors looking for a defensive approach, adding it to their recommended list.

‘Management team, Peter Spiller and Alastair Lang, have an exceptional record of protecting capital over the long term,’ the report noted.

As half of the portfolio is invested in overseas assets, the trust has benefited from sterling weakness. Numis adds that the introduction of a zero-discount control policy has improved trading liquidity and reduced share price volatility. The trust’s NAV rose by 13.1% in 2016.

Next: warming to Woodford Patient Capital

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Meanwhile, for investors looking for exposure to Japan, Numis recommends Baillie Gifford Japan (BGFD) as a core buy. ‘We have long favoured this fund due to its strong long-term track-record of outperformance from a focus on mid-cap growth stocks,’ Numis noted.

Next: time to buy TR Property

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Time to buy TR Property

TR Property (TRY) has also been added to Numis’ recommended list, another overlap with Winterflood’s annual review.

‘The mandate to invest primarily in listed property equities is unique in the investment companies sector and we rate the lead manager, Marcus Phayre-Mudge, highly,’ explained analysts at the group.

Meanwhile in the technology space, Numis has replaced Herald (HRI) with Polar Capital Technology (PCT). This decision was taken because the team like Polar Capital manager Ben Rogoff’s focus on themes driving future growth, rather than incumbents.

They have removed Herald because they cannot see a clear catalyst for the trust’s 17.8% discount to NAV to narrow.

Next: Numis’ other recommendations

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Leave a comment!

Winners and losers

Numis Securities’ investment trusts analysts have reviewed the performance of their recommendations in 2016.

Looking back at a year dominated by the Brexit vote, Donald Trump’s election victory and a swing from defensive into economically-sensitive cyclical stocks, the team, led by Charles Cade, described their tips as a ‘mixed bag’.

Their winners included Monks (MNKS), Temple Bar (TMPL), Fidelity Special Values (FSV), North American Income (NAIT), JPMorgan US Smaller Companies (JUSC), alongside BlackRock World Mining (BRWM), which doubled after a long period of weak performance.

Leave a comment!

Winners and losers

Numis Securities’ investment trusts analysts have reviewed the performance of their recommendations in 2016.

Looking back at a year dominated by the Brexit vote, Donald Trump’s election victory and a swing from defensive into economically-sensitive cyclical stocks, the team, led by Charles Cade, described their tips as a ‘mixed bag’.

Their winners included Monks (MNKS), Temple Bar (TMPL), Fidelity Special Values (FSV), North American Income (NAIT), JPMorgan US Smaller Companies (JUSC), alongside BlackRock World Mining (BRWM), which doubled after a long period of weak performance.

The team feels positive about the changes that chief executive Andrew Bell has put in place since he was appointed in 2010, including the decision to stop allocating to index trackers. They also welcomed the board’s decision to repurchase the 15.8% stake held by Aviva at a 6.5% discount to ‘net asset value’, which equates to the trust’s total underlying assets.

‘We believe that Witan is an attractive way to gain diversified global equity exposure via a range of leading managers through a cost-effective vehicle with ongoing charges of 0.72% or 0.99% including performance fees,’ Numis said.

The team removed Foreign & Colonial, following a strong year which saw the trust’s share price rise by 33.8% and net asset value increase by 34.2%.

Next: BlackRock Income Strategies a ‘buy’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

BlackRock Income Strategies a ‘buy’

BlackRock Income Strategies (BIST), formerly British Assets, had a difficult 2016, marked by a 16% share price fall and 5% NAV decline.

‘The fund faced a number of headwinds, including the need to deliver a high dividend payout at a time of falling long term rates, and the drag of expensive debt. In addition, a cut in the fund’s equity exposure in early 2016 was poorly timed with hindsight,’ Numis explained.

In late 2016, the board decided to sack BlackRock as manager, in favour of Aberdeen Asset Management. Mike Brooks and Tony Foster (pictured) of Aberdeen’s diversified multi-asset team will manage the trust, which will be renamed Aberdeen Diversified Income and Growth (ADIGT).

The trust is also set to merge with the Aberdeen UK Tracker Trust (AUKT). The board hopes this will increase the size of the trust, lower its cost ratio and improve the liquidity, or tradability, of its shares.

Numis welcomes these changes, alongside the planned tender offer for up to 20% of its NAV ahead of the merger. ‘The proposals provide a sensible solution for the problems of both funds. A key trigger has been the fact that Aviva is the largest shareholder in both companies: 13.3% in BIST and 24.7% in AUKT,’ Numis said.

Aviva’s stakes pose potential problems because the insurer is looking to sell out of the legacy stakes it inherited from AXA, after buying its Friends Life business.

On a discount to NAV of 12%, Numis believes that BIST offers value.

Next:‘sell’ Lindsell Train

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

‘Sell’ Lindsell Train

Under manager Nick Train, Lindsell Train (LTI) has generated stellar returns over the years. Over three years, its share price is up 158.2% while its NAV returned 83.5%.

However, an investor shift out of ‘bond proxies’, defensive stocks that offer bond-like stable dividends, into cyclical stocks has hit the trust’s performance over the past three months. The trust’s popularity means that it has consistently traded at a high premium, which today stands at 56.3%. Numis describes this figure as ‘excessive’.

‘Shareholders face the potential for substantial losses if the premium starts to contract. We would recommend switching into one of the other defensive global investment companies or into Finsbury Growth (FGT), also managed by Nick Train, which has minimal discount volatility due to an active share buyback and issuance policy,’ analysts at Numis explained.

With this in mind, Numis has moved the trust to a sell rating.

Next: Capital Gearing protects capital

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Capital Gearing protects capital

Like their rival Winterflood Securities, Numis highlights Capital Gearing Trust (CGT) as a top pick for investors looking for a defensive approach, adding it to their recommended list.

‘Management team, Peter Spiller and Alastair Lang, have an exceptional record of protecting capital over the long term,’ the report noted.

As half of the portfolio is invested in overseas assets, the trust has benefited from sterling weakness. Numis adds that the introduction of a zero-discount control policy has improved trading liquidity and reduced share price volatility. The trust’s NAV rose by 13.1% in 2016.

Next: warming to Woodford Patient Capital

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Meanwhile, for investors looking for exposure to Japan, Numis recommends Baillie Gifford Japan (BGFD) as a core buy. ‘We have long favoured this fund due to its strong long-term track-record of outperformance from a focus on mid-cap growth stocks,’ Numis noted.

Next: time to buy TR Property

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Time to buy TR Property

TR Property (TRY) has also been added to Numis’ recommended list, another overlap with Winterflood’s annual review.

‘The mandate to invest primarily in listed property equities is unique in the investment companies sector and we rate the lead manager, Marcus Phayre-Mudge, highly,’ explained analysts at the group.

Meanwhile in the technology space, Numis has replaced Herald (HRI) with Polar Capital Technology (PCT). This decision was taken because the team like Polar Capital manager Ben Rogoff’s focus on themes driving future growth, rather than incumbents.

They have removed Herald because they cannot see a clear catalyst for the trust’s 17.8% discount to NAV to narrow.

Next: Numis’ other recommendations

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

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